<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from TO
Commission file number 33-43870
NYLIFE STRUCTURED ASSET MANAGEMENT COMPANY LTD.
(Exact name of registrant as specified in its charter)
TEXAS 13-3641944
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
51 MADISON AVENUE, NEW YORK, NEW YORK 10010
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 576-6456
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No __
Yes X No __
<PAGE>
NYLIFE STRUCTURED ASSET MANAGEMENT COMPANY LTD.
INDEX
PAGE NO.
-------
Part I- Financial Information (Unaudited)
Item 1. Financial Statements
Statement of Financial Position as of
June 30, 1999, and December 31, 1998 3
Statement of Operations and Retained Earnings
(Accumulated Deficit) for the Three and Six Months
Ended June 30, 1999 and 1998 4
Statement of Changes in Members' Capital for
the Six Months Ended June 30, 1999 5
Statement of Cash Flows for the Six
Months Ended June 30, 1999 and 1998 6
Notes to the Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 10
Part II- Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Exhibits Index 12
Signatures 13
2
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NYLIFE STRUCTURED ASSET MANAGEMENT COMPANY LTD.
STATEMENT OF FINANCIAL POSITION
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------------ -------------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,010,649 $11,090,211
Segregated cash and cash equivalents 1,520,974 7,018,453
Segregated investments in U.S. government securities 20,011,172 22,342,580
Interest and other receivables 600,046 609,999
------------------ -------------------
Total current assets 23,142,841 41,061,243
------------------ -------------------
Total assets $23,142,841 $41,061,243
------------------ -------------------
------------------ -------------------
LIABILITIES AND MEMBERS' CAPITAL
CURRENT LIABILITIES
Notes payable (Note 2) $18,402,333 $20,600,090
Interest payable (Note 2) 204,190 238,735
Accounts payable and accrued liabilities 195,176 568,507
Monitoring fees payable - 344,963
Due to Servicer - 95,450
Due to affiliates (Note 3) - 110,753
------------------ -------------------
Total current liabilities 18,801,699 21,958,498
------------------ -------------------
Total liabilities 18,801,699 21,958,498
------------------ -------------------
MEMBERS' CAPITAL
Contributed capital 6,000,000 6,000,000
Distributions to members (19,286,983) (4,586,983)
Retained earnings 17,628,125 17,689,728
------------------ -------------------
Total members' capital 4,341,142 19,102,745
------------------ -------------------
Total liabilities and members' capital $23,142,841 $41,061,243
------------------ -------------------
------------------ -------------------
</TABLE>
See accompanying notes to the financial statements.
3
<PAGE>
NYLIFE STRUCTURED ASSET MANAGEMENT COMPANY LTD.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
---------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
INCOME
Interest $ 262,026 $ 107,230 $ 616,449 $ 216,916
Monitoring revenue - 3,388,762 - 7,439,330
Gain on sale of security alarm monitoring contracts - - - 7,142,034
Other income 293,453 2,920 293,453 276,312
----------- ----------- ----------- -----------
Total income 555,479 3,498,912 909,902 15,074,592
EXPENSES
Interest expense $ 419,289 $ 608,548 $ 858,298 $ 1,375,587
General and administrative 74,670 204,054 83,207 406,934
Monitoring fees - 1,227,471 - 2,492,280
Consulting fees - 65,105 - 136,459
Asset management fee to affiliate - 97,233 - 210,785
Equity return fee to affiliate - 54,347 - 108,693
Bad debt expense - 115,814 - 318,532
Valuation adjustment of security alarm monitoring contracts - 487,268 - 977,626
Amortization of debt issuance costs paid to affiliates - 147,348 - 294,697
----------- ----------- ----------- -----------
Total expenses 493,959 3,007,188 941,505 6,321,593
----------- ----------- ----------- -----------
Net income (loss) 61,520 491,724 (31,603) 8,752,999
Retained earnings (accumulated deficit) at beginning of period 17,596,605 7,045,369 17,689,728 (1,215,906)
----------- ----------- ----------- -----------
Retained earnings at end of period $17,658,125 $7,537,093 $17,658,125 $ 7,537,093
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
4
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NYLIFE STRUCTURED ASSET MANAGEMENT COMPANY LTD.
STATEMENT OF CHANGES IN MEMBERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
NYLIFE NYLIFE Total
SFD Holding Depositary Members'
Inc. Corp. Capital
----------- ---------- -----------
<S> <C> <C> <C>
Balance at December 31, 1998 $15,918,517 $3,184,228 $19,102,745
Distribution to members (12,201,000) (2,499,000) (14,700,000)
Net (loss) (26,335) (5,268) (31,603)
----------- ---------- -----------
Balance at June 30, 1999 $ 3,691,182 $ 679,960 $ 4,371,142
----------- ---------- -----------
----------- ---------- -----------
</TABLE>
See accompanying notes to the financial statements.
5
<PAGE>
NYLIFE STRUCTURED ASSET MANAGEMENT COMPANY LTD.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
1999 1998
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (31,603) $ 8,752,999
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Gain on sale of security alarm monitoring contracts - (7,142,034)
Valuation adjustment of security alarm monitoring contracts - 977,626
Amortization of debt issuance costs - 294,697
Bad debt expense - 318,532
Changes in assets and liabilities:
Decrease in interest and other receivables 9,953 635,395
Decrease in due from Servicer - 100,572
Decrease in other receivables - 234,638
(Decrease) increase in accounts payable and accrued liabilities (403,331) 896,937
Decrease in monitoring fees payable (344,963) -
Decrease in due to Servicer (95,450) (249,498)
Decrease increase in due to affiliates (110,753) (50,027)
Decrease in unearned revenue - (942,268)
Decrease in interest payable (34,545) (165,347)
------------ ------------
Net cash provided by (used in) operating activities (1,010,692) 3,662,222
------------ ------------
Cash flows from investing activities:
Proceeds from sale of security alarm monitoring contracts - net
of disposal costs - 14,857,817
Purchase price refunds - investment in security alarm
monitoring contracts - 36,800
------------ ------------
Net cash provided by investing activities - 14,894,617
------------ ------------
Cash flows from financing activities:
Proceeds from US gov't securities 2,331,408 -
Principal payments on Notes (2,197,757) (14,267,489)
Distribution to members (14,700,000) (3,204,230)
------------ ------------
Net cash used in financing activities (14,566,349) (17,471,719)
------------ ------------
Net increase (decrease) in cash and cash equivalents (15,577,041) 1,085,120
Cash and cash equivalents (including segregated cash and
cash equivalents) at beginning of period 18,108,664 12,211,825
------------ ------------
Cash and cash equivalents (including segregated cash and
cash equivalents) at end of period $ 2,531,623 $ 13,296,945
------------ ------------
------------ ------------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 892,843 $ 1,540,934
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to the financial statements.
6
<PAGE>
NYLIFE STRUCTURED ASSET MANAGEMENT COMPANY LTD.
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
NOTE 1 - ORGANIZATION
NYLIFE Structured Asset Management Company Ltd. (the "Company" or "SAMCO") is a
limited liability company formed under the laws of the State of Texas on October
18, 1991. A limited liability company offers its equity investors limited
liability protection while providing them with flow through tax treatment.
SAMCO has two members. The principal member is NYLIFE SFD Holding Inc. ("SFD
Holding"), formerly NAFCO Inc. The other member is NYLIFE Depositary Corporation
("NDC"). Both members are Delaware corporations and wholly owned subsidiaries of
NYLIFE Inc. (a direct wholly owned subsidiary of New York Life Insurance
Company, "New York Life"). Certain directors and officers of SFD Holding have
been designated as managers of SAMCO. A manager of a limited liability company
is similar to a director of a corporation, and may designate one or more persons
as officers of the limited liability company.
On January 15, 1992, SFD Holding and NDC (collectively, the "Members") purchased
membership interests in SAMCO of 83.33% and 16.67%, respectively. SFD Holding
made an initial capital contribution to SAMCO of 500 shares of $1 par value,
non-voting, non-convertible, 24.39% cumulative preferred stock of NYLIFE Bridge
Investor Inc. ("NBII"), a subsidiary of SFD Holding prior to its liquidation on
June 30, 1993. The preferred stock was originally valued by SAMCO at $5,000,000
which represents SFD Holding's recorded carrying value for the preferred stock.
NDC made an initial capital contribution of $1,000,000 in cash. SAMCO had no
operations prior to January 15, 1992.
SAMCO issued secured five-year floating rate notes and secured five year fixed
rate notes (the "Notes"), in order to finance the acquisition of security alarm
monitoring contracts (the "Contracts"). Such Contracts consisted of the
obligations and payment rights with respect to monitoring services, and in
certain instances repair and maintenance services, for security alarm systems in
residential homes and light commercial businesses. Security alarm monitoring is
the process of notifying designated parties (either individuals or public
authorities) if an unauthorized entry, fire, medical or other emergency signal
from a customer alarm system is received at a central monitoring station. All
references in these Notes to the Financial Statements to "Servicer" shall mean
Protection One Alarm Monitoring, Inc. ("Protection One").
7
<PAGE>
ACTIVITIES IN 1999
As mentioned in Note 2, during 1998 SAMCO sold all of its security alarm
monitoring contracts to Protection One. In 1999, SAMCO's sole source of revenue
is interest income from its cash and cash equivalents. SAMCO's remaining
obligations include accrued liabilities, ongoing general and administrative
expenses and the debt service on the Series C Notes until their maturity on
August 16, 1999. SAMCO's June 30, 1999 cash and cash equivalents balance of $2.5
million, in addition to investment interest and principal payments to be
received in 1999, is substantially in excess of its remaining obligations.
On March 10, 1999, SAMCO distributed $14.7 million to its Members. In addition,
after the payment of accrued liabilities, ongoing operating expenses and the
remaining obligations on the Series C Notes, SAMCO expects to return
approximately $4.1 million to its Members during 1999.
NOTE 2 - SECURITY ALARM MONITORING CONTRACTS AND NOTES PAYABLE
DISPOSITION OF ASSETS AND MATURITY OF SERIES A NOTES
In February 1998, SAMCO sold to WestSec the Contracts and related assets which
constituted the collateral securing SAMCO's Series A Notes. A portion of the
proceeds of the sale were used to pay all outstanding principal and accrued
interest on the Series A Notes on February 17, 1998, the maturity date of such
Notes. SAMCO recognized a gain of approximately $8.0 million on the sale of the
Series A Contracts.
DISPOSITION OF ASSETS AND MATURITY OF SERIES B NOTES
In August 1998, SAMCO sold to WestSec the Contracts and related assets which
constituted the collateral securing SAMCO's Series B Notes. A portion of the
proceeds of the sale were used to pay all outstanding principal and accrued
interest on the Series B Notes on August 17, 1998, the maturity date of such
Notes. SAMCO recognized a gain of approximately $3.8 million on the sale of the
Series B Contracts.
DISPOSITION OF ASSETS AND DEFEASANCE OF SERIES C NOTES
On December 17, 1998, SAMCO sold to Protection One, as successor by merger to
WestSec, its remaining security alarm monitoring contracts and related assets,
including those which constituted the collateral securing SAMCO's Series C
Notes. The purchase price for the contracts and related assets was $29.5
million. SAMCO recognized a gain of approximately $4.8 million on the sale of
its remaining Contracts. The transaction was consummated pursuant to a
Settlement Agreement dated December 17, 1998 between SAMCO and WestSec which
resolved litigation between the parties.
A portion of the proceeds of the sale were used to purchase United States
Government obligations which were deposited with United States Trust Company of
New York (the "Trustee") pursuant to section 7.1(b) of the Indenture. The
securities had an aggregate value sufficient to pay principal and interest to
the Series C Noteholders on the then
8
<PAGE>
remaining distribution dates of February 16, 1999, May 17, 1999 and at maturity
on August 16, 1999.
On March 19, 1999, SAMCO obtained a release of the lien of the Security
Agreement as required by Section 7.1(b) of the Indenture and was therefore
relieved of its obligations under the Series C Notes, the Indenture and the
Security Agreement.
INTEREST PAYABLE and NOTES PAYABLE in the Statement of Financial Position at
June 30, 1999 and December 31, 1998 include amounts relating to the Series C
Notes as follows:
6/30/99 12/31/98
---------------- ---------------
Interest payable $204,190 $238,735
---------------- ---------------
---------------- ---------------
Notes payable - current $18,402,333 $20,600,090
Notes payable - non-current -0- -0-
---------------- ---------------
---------------- ---------------
Total $18,402,333 $20,600,090
---------------- ---------------
---------------- ---------------
NOTE 3 - RELATED PARTIES
DUE TO AFFILIATES in the Statement of Financial Position at December 31, 1998
includes the asset management fee payable to SFD Holding of $78,867 and the
equity return fee payable to SFD Holding of $31,886.
NOTE 4 - SUBSEQUENT EVENT
FINAL DISTRIBUTION TO SERIES C NOTEHOLDERS
On August 16, 1999, SAMCO will distribute $18,815,255 to the Series C
Noteholders which will include interest at an annualized rate of 9.00% plus
the remaining principal on the Series C Notes.
DISSOLUTION
Subsequent to the final payment to the Series C Noteholders, SAMCO will
liquidate and distribute its remaining equity of approximately $4.3 million
to its Members.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES - 1999
At June 30, 1999 the Company has $22.5 million of cash and cash equivalents. Of
this amount, $20 million of United States Government securities have been
deposited with the Trustee for the specific purpose of paying the remaining
principal and interest to the Series C Noteholders at maturity on August 16,
1999.
SAMCO sold all of its security alarm monitoring contracts to Protection One in
1998. In 1999, SAMCO's sole source of revenue is interest income from its cash
and cash equivalents. SAMCO's remaining obligations include accrued liabilities,
ongoing general and administrative expenses and the debt service on the Series C
Notes until their maturity on August 16, 1999. SAMCO's June 30, 1999 cash and
cash equivalents balance of $22.5 million, in addition to investment interest
and principal payments to be received in the third quarter of 1999, is
substantially in excess of its remaining obligations.
On March 10, 1999, SAMCO distributed $14.7 million to its Members. After the
payment of accrued liabilities, ongoing operating expenses and the remaining
obligations on the Series C Notes, SAMCO expects to return approximately $4.1
million to its Members during 1999.
RESULTS OF OPERATIONS - 1999
As mentioned above, SAMCO sold all of its security alarm monitoring contracts to
Protection One in 1998. As a result, SAMCO derived 100% of its income from
interest income on short-term investments for the three and six months ended
June 30, 1999.
Interest expense decreased in the current quarter compared to the 1998 quarter
as the Series A and B Notes have matured and the Company continued to pay down
scheduled and additional principal on the Series C Notes.
The Company's operating expenses include general and administrative expenses,
including (i) audit fees, (ii) printing and mailing of quarterly reports to
investors, (iii) legal fees and (iv) interest expense. In 1999, the Company
reversed $293,453 previously accrued in 1998 for state franchise taxes which
is reflected in other income in the Statement of Operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
NONE.
10
<PAGE>
Part II. Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
A list of Exhibits required by Item 601 of Regulation S-K and filed as
part of this report is set forth in the Index to Exhibits.
(b) REPORTS ON FORM 8-K:
None.
11
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
(3) ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Articles of Organization of Company. *
3.2 Amended Regulations of Company. *
3.3 Amendment to Articles of Organization of Company. *
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES:
4.1 Indenture. *
4.2 Form of Global Note, included as Exhibit A to Exhibit 4.1. *
4.3 Form of Definitive Note, included as Exhibit B to Exhibit 4.1. *
4.4 Form of Security Agreement, included as Exhibit C to
Exhibit 4.1.*
4.5 Form of First Supplemental Indenture. *
4.6 Form of Second Supplemental Indenture. *
(27) Financial Data Schedule**
- -------------------------------------------
* Previously filed.
** Filed herewith.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on July 28, 1999.
NYLIFE Structured Asset Management
Company Ltd.
/s/ Kevin M. Micucci
-------------------------------
By: Kevin M. Micucci
Manager and President
(Principal Executive, Financial
and Accounting Officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,531,623
<SECURITIES> 20,011,172
<RECEIVABLES> 600,046
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,142,841
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,142,841
<CURRENT-LIABILITIES> 369,366
<BONDS> 18,402,333
0
0
<COMMON> 0
<OTHER-SE> 4,371,142
<TOTAL-LIABILITY-AND-EQUITY> 23,142,841
<SALES> 0
<TOTAL-REVENUES> 909,902
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 941,905
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 858,298
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,603)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
